04/06/2010

The Doctor Will RFID You Now

Remember a few years back when Pharmaceuticals were the RFID topic dujour?

Suppliers were salivating over its near-term potential. Resellers were lining up to position themselves for the high margin RFID health care opportunities. Evangelists were gushing over the potential for RFID to revolutionize quality in life sciences.

And then, do you remember when this market went flat after a series of delays in standards development, FDA approval, and piloting?

Well, it looks like the Pharmaceutical opportunity is resurfacing again on the roadmaps of more than a few suppliers. But this time, it is for real. This time, RFID is also on the roadmaps of the customer.

Several factors are driving the Pharmaceutical industry’s reemergence, including:

Improved performance– this is not the same offering that was available when the RFID revolution began. Most issues pertaining to read rates and accuracy, the ability to function on or around metals/liquids and in dense tag environments, range limitations, security, compatibility and durability have been addressed. RFID is now capable of satisfying most (if not all) solution requirements and can be configured to be compatible with most legacy infrastructure.

Real-world proven – the technology has been established and proven to meet and/or exceed specifications in relevant real-world applications, such as tracking products at all echelons (i.e.: container, pallet, case/carton, item) in each environment (shop-floor, warehouse/DC/Yard, retail floor) throughout the value chain, enhancing security and anti-counterfeiting measures, etc.

Economies of scale – the price point for RFID has decreased dramatically and the hardware has become increasingly commoditized.

Additionally, continued momentum is noted:

The Korean government recently stated that 50% of all its drugs will be RFID tagged by 2015.

The recent theft of $75 million worth of pharmaceutical product from an Eli Lilly warehouse has created additional awareness for the need for a more secure value chain – including one that incorporates RFID.

Rumor on the street is that there will be more than 35 million RFID tagged pharmaceutical items in circulation by the end of 2010, a number expected to scale rapidly over the next 3 years.

The FDA recently published its final guidance on serialization, not only creating a platform for a more global solution (i.e.: leverages GTIN developed by GS1), but also paving the way for RFID to be used as an alternative to 2D bar codes.

Although it looks like all the ducks are lining up, don’t forget how burdened the adoption rate can be in this industry and keep your expectations in check.

Our conservative market models, driven by input from dozens of pharmaceutical developers, wholesalers and retailers, reveal an opportunity that might be around $125 million in 2010, and grow nearly 22% (CAGR) through 2014. The projects will be highly competitive, schedule and budget challenged, and of varying profitability, but, they will be funded.

Well positioned suppliers will win deals. The best positioned suppliers will make money.